When you think about your future, what do you see? Are you Mr and Mrs Optimistic?
Maybe you see an older version of yourselves experiencing different cultures and enjoying life to the full? Perhaps you’re something of a realist, and envisage spending more time pottering around in the garden and surrounded by loving friends and family. Or, does every silver lining always seem to have a cloud? Maybe you’re something of a pessimist, and imagine yourselves running into financial difficulties down the line.
The thing is, any of these scenarios are possible; we just need to be prepared.
Always look on the bright side?
We all have a combination of optimistic, realistic and pessimistic thoughts about life. But the majority of us prefer to paint a rosier picture of the future. In fact, we are most likely predisposed to do so. As youngsters, we have this optimistic view instilled in us; we might have great aspirations of what we want to be when we grow up – astronauts, firefighters, or doctors – but we don’t give a second thought about how we would achieve our dream jobs until we’re that bit older.
So, is being an optimist always the best way to approach life? When it comes to our future finances, too much optimism might not be the most productive approach.
Control your financial destiny
Regardless of whether you’re a glass half full or half empty kind of person, there are things you can do to make your future-self more content and better off. Because luckily, your future isn’t set in stone…
Accept change. You might think you’re heading in one particular direction, but nothing is guaranteed. Every decision you make and action you take influences your future. Some decisions will have a significant impact on your life – your friends, partner or career. Then there are the decisions that are best forgotten: that time you decided to text your ex after a bottle of wine, for instance.
Focus on solid financial decisions. You might not have invested in Apple in 2002 (not many of us can lay claim to that particular financial stroke of genius – and those who can are now millionaires), but you may have made some sound financial decisions of your own: never spending more than you earn; saving into a pension pot early; or buying a house. All of these stand you in good financial stead.
Be more grounded. It’s not all rainbows and unicorns – in fact, too much positivity could even lead you to lose judgment and do something reckless. Equally, constantly reassuring yourself ‘everything’s fine’ (that looming debt or a job you hate) could mean you put off making necessary changes to improve your immediate situation.
Create a monthly budget. A solid budget needs be accurate and also account for those unexpected things (your boiler breaking on 1 December, for example).
Set financial goals. Realistic short-term goals include paying off a credit card bill or saving for a new laptop. But why not be even smarter? Make long-term goals too, such as starting a pension pot early.
Get real about debt. Be strategic when it comes to paying off debt. Focus on paying off the debt that carries the most serious consequences first. Prioritising in this way will ensure you make real progress.
Check your retirement plans are on target. Think carefully about how much money you’ll need when you retire. Play picture this to find out if you’re saving enough for a future you’ll love.
Check your life insurance. If the worst happened and you were not around, have you got enough life insurance to help financially protect your family? Use our ‘Value your World’ tool to find out how much money they might need to manage.
Create a will. Again, this will give you peace of mind that your money will go to your loved ones when you’re no longer around.
You may not be one of life’s planners, but a little bit of ‘realistic’ planning can go a long way. Or in other words, by all means stop and smell the roses - just make sure you check for dog muck first.